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What the Best Digital Procurement Functions Do Differently

Digitalization offers huge promise for all corporate functions to change the way they work, but the majority of procurement teams have not yet started; that should change

Despite digitalization being one of the biggest changes to global business in more than a generation, few corporate procurement are yet taking advantage of new technology. Those that are, are reaping the rewards – with benefits like a 47% improvement in the speed at which they can implement a new plan – but they are in the distinct minority.

In fact, 56.6% of 109 procurement professionals responding to a CEB, now Gartner survey said they have no plans to adopt even some of the most common digital technologies.

Digital Leaders

Those that are forging ahead and taking advantage of digitalization don’t differ from their peers by the typical procurement distinctions. They compare similarly with the spend they have under management, the percentage of direct versus indirect spend, and the number of contracts they deal (see chart 1).

But what does set them apart is that they have all developed a plan of action, while the average procurement team hasn’t (see chart 2). They’re preparing, experimenting, and sharing their plans to go digital with their business partners.


Chart 1: Digital exemplars compared with everyone else  Basic demographic and budget information; n=109 procurement organizations  Source: CEB 2017 Procurement Digital Benchmark Initiative

Note: Ranges from first through third quartiles.

 

Chart 2: Comparison of select digital investments between digital exemplars and rest of survey population  n=109 procurement organizations  Source: CEB 2017 Procurement Digital Benchmark Initiative


Where Procurement Is Falling Flat

What the charts above mean for senior procurement managers is that the benefits of technology are within their grasp if only they take the initiative to seize them. But, unfortunately for the typical procurement organization, the picture isn’t pretty: only 22% have a long-term digital strategy, only 13% have mature change management capabilities, and only 7% experiment with digital technology even when the returns aren’t clear, according to CEB, now Gartner data.

Procurement teams that are leading the digital charge typically excel in three areas:

  1. Long-term digital investment plan: These functions know what processes to upgrade, they benchmark technology with their peers, and they’re familiar with the vendor marketplace.

  2. Over-invest in change management: These functions secure stakeholder buy-in for new systems; they also make sure these systems are easy to use and fit into workflows.

  3. Experiment with advanced technology: These functions try out new digital technologies even if they provide no immediate return.

Three Steps to Take

And this means that procurement teams have three steps they should take. Procurement teams that have done this have seen results like a 37% boost in spend compliance, a 21% increase in savings, and 54% better visibility into what the business is spending.

  1. Make digital the agenda: Procurement should create a plan that tells the CEO, business partners, and procurement staff the advanced technologies it wants and how they’ll enhance its value to the rest of the company.

  2. Expend the chief procurement officer’s personal capital to encourage change: Procurement leaders should take control of projects to prevent delays and improve adoption.

  3. Prioritize opportunity over payoff: Procurement executives should stop discounting unproven ideas from vendors and instead encourage experimentation that could provide value.

 

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